Recent multi-billion-dollar damage
awards issued by foreign courts against large American companies have focused
attention on the once-obscure, patchwork system of enforcing foreign-country
judgments in the United States. That system’s structural problems are even more
serious than its critics have charged. However, the leading proposals for
reform overlook the positive potential embedded in its design.

In the United States, no treaty or federal law controls the domestication of
foreign judgments; the process is instead governed by state law. Although they
are often conflated in practice, the procedure consists of two formally and
conceptually distinct stages: foreign judgments must first be recognized and
then enforced. Standards on recognition differ widely from state to state, but
under current law once plaintiffs have secured a recognition judgment all
American courts must enforce it irrespective of their own recognition law.
Thus, plaintiffs can enforce in states that would have rejected the foreign
judgment in the first place.

This brand of forum shopping, which I call “judgment arbitrage,” creates a
fundamental structural problem that has thus far escaped scholarly attention:
it undermines the power of individual American states to determine whether
foreign-country judgments are enforced in their territory and against their
citizens. It also suggests a powerful, if implied, conflict of recognition laws
among sister U.S. states that precedes and often determines the outcome of what
scholars currently consider the primary conflict, between American and foreign
law. Finally, this system impedes the development of state law and weakens
practical constraints on the application of foreign nations’ laws in the United
States.

This Article constructs a novel framework for conceptualizing these problems,
and addresses them by proposing a federal statute that would allow states to
capture the benefits — and require them to internalize the costs — of their own
recognition rules. Rather than scrap the current state-law system in favor of a
single federal rule, as the American Law Institute and some leading scholars
call for, or institute a national regime of centrally-designed uniform state
laws, as the Uniform Law Commission and other commentators have urged, the
statute proposed in this Article would provide incentives for competition among
states for recognition law. The Article argues that sharpening jurisdictional
competition would encourage experimentation, the development of superior law,
and, eventually, greater uniformity in an area where scholars agree uniformity
is desirable. The proposal may also suggest ways to manage other sister-state
conflicts of law in an age when horizontal conflicts are proliferating.